ECON 050 Lecture Notes - Lecture 30: Aggregate Supply, Inflation Targeting, Phillips Curve
21 Sep 2020
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Document Summary
Since mid-1993, the average rate of inflation has come down and has generally been within the target inflation range, until recently (from about 2015). Also there has been much less variability in inflation. Currently headline inflation is running at around 1. 6%, which is below the target band. This measure of inflation expectations has come down to levels which were broadly consistent with actual inflation, and with the inflation target. However, from 2015, this measure has fallen below the target range, consistent with the path of actual inflation. Inflation targeting in australia has been successful over the last two decades. However, there are some challenges (see gillitzer and simon (2015) Though variability of the domestic component of inflation has declined, much of the variation in cpi inflation is now caused by imported shocks, such as commodity price and exchange rate changes.
